A Short Sale or a Long Wait?

We hear terms bandied about in this real estate market.  Everyone knows what a foreclosure is.  Some know what REO means –  no, it's not the name of a '70s Rock Band (what would that have to do with real estate?).


You may have heard the term "Short Sale" and thought it was a quick, fun transaction.  It's not.  Short Sales are the longest, most frustrating, unbelievably unforgiving transaction you can enter into!


Here's the scoop on short sales:  Someone wants to (or has to) sell their home.  They owe more than what the property is currently worth.  Some would say they are "upside down" in their mortgage.  When it's time to sell, they have to ask the lender to take less money than what is outstanding and consider the mortgage paid off. 


The seller may or may not be current with their monthly payments.  If they ARE current, there is must less likelihood that the lender will be willing to settle for less than the entire amount outstanding.  If the seller is BEHIND – the lender has some amount of motivation to take a "short" payoff now, rather than inherit the property LATER in foreclosure.  Most lenders are willing to consider remedies to avoid a foreclosure.  They don't want the house – they want money.


First of all, if someone wants to (or has to) sell their home and knows they are upside down, one certain way to get the lender's consideration for a short sale is to stop making their mortgage payments.  Yes – their credit will get trashed, but the other option is to pony up, perhaps thousands of dollars, in order to close an upside-down sale.  If the lender won't do a short sale, the seller has to make up the difference – ouch!


The seller, in order to be able to move on with their life, STOPS making their mortgage payments.  Now the lender will play in the sandbox with them.  An offer comes in and the lender is asked to take a short pay-off.  Most of these loans are owned by HUGE conglomerates (the ones we've been hearing about on the news for months).  They are NOT easy to deal with.  You never talk to the same person; they never give you the same answer; they lose the paperwork you fax them; they lose the paperwork you carefully scanned, PDF'd and emailed; they won't call you – you have to call them; they assign the file to a different department; they have to get MORE documentation (you wouldn't believe!); they have to get two more approvals; the list goes on.


Anywhere from two to five months later – IF the buyer has the patience to wait for what promises to be an open-ended amount of time – there MAY be a closing.  By that time, the buyer isn't in love with the property, the seller is in a financial pit, and the real estate agent is frazzled from being in the middle. 


The good news??  IF.....IF....you have the patience, the endurance, the vision, the fortitude, and the ability to ignore horrendous business practices.... IF.... You are willing to put up with a nightmare transaction – Short Sales are the best bang for your buck!! We're seeing lenders take hits of 30%-50% of what is owed just to avoid putting these homes in their portfolio.  Find a good agent and hang on.... It's quite a ride, but it can be worth the adventure!

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